Claiming a Large Slice of a Small Pie: Asymmetric Disconfirmation in Negotiation

Abstract

Three studies show that negotiators consistently underestimate the size of the bargaining zone in distributive negotiations (the small pie bias) and, by implication, overestimate the share of the surplus they claim (the large slice bias). We explain the results by asymmetric disconfirmation: Negotiators with initial estimates of their counterpart's reservation price that are "inside" the bargaining zone tend to behave consistently with these estimates, which become self-fulfilling, whereas negotiators with initial "outside" estimates revise their perceptions in the face of strong disconfirming evidence. Asymmetric disconfirmation can produce a population-level bias even when initial perceptions are accurate on average. We suggest that asymmetric disconfirmation has implications for confirmation bias and self-fulfilling prophecy research in social perception.

Keywords: confirmation bias, feedback, learning, negotiation, self-fulfilling prophecy, triangle hypothesis

JEL Classification: C70, C78, D74, D83